Risk Management

A key component of the risk management philosophy for any organization is the definition of its risk-appetite. Risk-appetite reflects the amount of risk that an organization may incur, depending on its financial and operational capabilities, growth rates and expectations in terms of profitability from stakeholders (i.e. shareholders, sellers, lenders, etc.)

In determining the risk-appetite, we adhere to the recommendations of the Professional Risk Manager's International Association standards. According to these standards, risk-appetite can be expressed quantitatively, in the form of allowable deviations and losses in the process of creating value for the Company and qualitatively, by establishing "top-level" statements that the organization seeks not to violate.

The main benefits and the positive effect of risk-appetite:

• Ensuring transparency of decisions and business initiatives of the organization;
• Improve the risk-based approach throughout the organization;
• Decision-making assistance: selection of the most reliable scenarios for strategic development, definition of short- and long-term goals, taking into account the accepted risk, etc .;
• Ensuring the compliance of activities with the accepted risk;
• Understanding the acceptability of current levels of organization risk, such as VaR, expected loss, duration gap tests, and etc.
• Assistance in improving the internal control system, considering business priorities.
• Concepts of risk-appetite and acceptable level of risk are an effective tool for business management taking into account risks. We can help your organization build risk-appetite into strategic planning processes, develop statements about corporate risk-appetite, and also ensure its cascading inside the organization.

If the introduction of risk-based decision-making within your organization to the employees involved in risk management processes needs a deeper understanding of risk management processes, we can conduct trainings in various formats:

• Express trainings for senior managers and members of the board of directors;
• Training of employees, who are involved in the processes of identification, analysis, risk assessment and development of risk management activities, cross-functional interaction;
• Practical cases solution, considering specification of business;
• Quantitative risk assessment training with the help of specialized software;
• Testing materials development.

In order for the management of your organization to be able to take risk-oriented decisions based on calculated indicators, we can develop models for calculating KPIs under the influence of risks, considering the specifics of the business, allowing making of the budget planning, business plan or investment program with risks taken into account.

In order to successfully integrate risk management into business planning processes, we can:

• Develop or adjust normative documentation on business planning;
• Develop a scheme of interaction between the planning function and the risk management function in the process of risk analysis and accounting in the business plan (budget);
• Create a business plan, taking into account risks.

Market risks include such risks as interest rate risk, currency risk, commodity risk and pension risk. Unexpected volatility of financial markets can have a negative impact on corporate stability. Failure to manage risks effectively can lead to significant financial losses. One of the key decisions is the choice of strategy, which includes determining the optimal balance of profit, investment and risk level.

A clear understanding of what financial flows and to what extent affect the current liquidity of the company allows its management to make objective decisions in a short time.

We provide the following services:

• Development of the market risk management methodology for identification, assessment and monitoring (currency risk, interest rate risk, and price risk);
• Development of the market risk-aggregated models (VaR, CFaR, EaR), Monte-Carlo simulations, duration gap-tests etc.;
• Development of the forecasting (probabilistic/stochastic) volatility models based on confidence levels (in example, GARCH, EWMA) or valuation risk models for price determination and sensitivity of market risk factors (Black-Scholes, Binomial model);
• Development of the limits and triggers, development of risk tolerance levels;
• Evaluation of the company’s financial condition from the liquidity management point of view;
• Estimation of liquidity risk level and analysis of factors affecting the liquidity of the company;
• Assessment of the effectiveness of market risk management and analysis of key performance indicators (KPI);
• Establishment of market risks hedging strategies;
• Design of target processes and development of documents regulating liquidity management.

Involvement in financial transactions entails credit risk, which can lead to large losses for business if it is not under control. The assessment of credit risk has become even more important, as the financial crisis of 2007-08. demonstrated that financial institutions can also fail.

We provide the following services on credit risk management:

• Development of the tolerable (acceptable) level of credit risk;
• Development of the credit risk management policies and methodology;
• Development of the scoring model for credit risk assessment and forecast models for assessment of the counterparty credit risks (enterprise bankruptcy risks) based on Altman Z-score or other methods;
• Development of the credit risk loss database;
• Assessment of the expected loss and total loss for credit risk and calculation of the provision amounts;
• Credit risk models validation and development;
• Evaluation of the effectiveness of the credit risk management.

Operational risk can be defined as a risk of loss caused by inadequate or failed internal processes, people and systems or from external events. Small management failures and problem minimization, if not stopped in time, can create a big risk that can adversely affect the company as a whole. This is a chain reaction, which can be fatal for the reputation of the company and, probably, for its existence.

PwC consultants have extensive experience in developing and implementing operational risk frameworks, from the simplest to the most complex approaches.

We can provide the following services:

• Development and analysis of risk appetite statements and levels of risk tolerances;
• Development of the risk register and the risk map;
• Qualitative assessment of risks (probability, impact) and/or quantitative assessment of the operational risk level;
• Assessment of investment project risks;
• Development of the methodology of operational risk management;
• Development of the risk minimization plans;
• Development of Key risk indicators (KRI).

If managers of your organization need information about possible deviations in the project indicators (timing, cost, etc.) arising from the impact of risks, as well as about the criteria for deciding whether to approve or revise project plans based on a risk analysis, we can:

• Develop or update normative documentation in the field of project activities;
• Develop methods for identifying and assessing project risks;
• Develop a methodology for managing project risks;
• Conduct trainings for employees in risk management methods of investment projects.

Business Continuity Management provides organizations with the ability to respond to and cope with current problems. We believe that managing business continuity is an integral part of risk management, as well as overall operational management of the organization.

Our team consists of experienced professionals with in-depth experience, and our goal is to provide high-quality, pragmatic solutions that are easy to use and provide value for money.

To ensure the continuity of your business, we can:

• analyze the current state of business continuity processes;
• develop emergency response, crisis management and business recovery plans;
• organize testing of the operational efficiency of business continuity plans with responsible managers within your organization;
• Integrate business continuity plans with risk management processes.